Inside Allure’s beauty box business

Building a business model that extends beyond ad revenue and subscriptions is a print publication’s only shot to avoid collapsing. At Allure, its 3-year-old Beauty Box is at the center of a new revenue stream — and a new outlook on audience relationships for the beauty publisher.

“When I started at Allure two years ago, I was really insistent that we think of ourselves not as a magazine, and not even just as a media brand but a brand,” said editor-in-chief Michelle Lee. “It’s all about building an ecosystem. We found that subscribing to the Beauty Box makes you more likely to subscribe to the magazine. They all cross-pollinate and help one another.”

The subscription box costs $15 per month, and subscribers receive five or six products in each that are chosen by Allure editors. One product in every box edition is sponsored, and that’s disclosed in an Allure mini magazine that ships with the box and includes reviews and other information on everything inside. A few times a year, Allure will partner with a celebrity or influencer to select products, rather than the editors. For June, Allure partnered with tattoo artist Kat Von D for its first full-box “takeover”: Kat Von D selected products from her makeup line, and the box was redesigned for the first time to reflect the brand partnership.

The Kat Von D takeover design

Allure hasn’t shared specific figures around its subscribers for the beauty box since the summer of 2016, when subscribers clocked in at 30,000. Jill Friedson, the vp of marketing across the Condé Nast Beauty Collection, said the current subscriber count was up by 132 percent over this time last year, with revenue up 43 percent over the same period.

The Allure Beauty Box has become a key project at owner Condé Nast, as it looks to build out commerce businesses to evolve its revenue streams beyond advertising. In 2016, the majority of the Allure Beauty Box logistics were brought in-house at Condé Nast, including product procurement, brand relations, merchandising, customer data and research insight, customer service, PR and marketing. The only thing the company outsources is warehouse fulfillment.

“This endeavor, we believe firmly, is future-proofing a brand like Allure. It’s on the market, and it aligns with the editorial mission,” said Friedson. “It requires a lot of coordination. We call this the space of alternative revenue. We’re not thinking about our primary media business or advertising-driven models. We think actively about the beauty box as something that lets us reach a new consumer who may not be reading the magazine.”

Mucking around in the logistics of e-commerce has been tempting but risky territory for publishers looking to sell products while simultaneously running an editorial business. Condé Nast itself has been burned in the past, failing to launch the Vogue fashion e-commerce spin-off Style.com in 2016.

“Setting up a subscription front end isn’t terribly complicated. It’s on the backend, where you get into the fulfillment and supply chain stuff, that’s where the complexity is,” said Scot Wingo, executive chairman of ChannelAdvisor, an e-commerce software company. “That tends to be outside the core competency of media companies, and is harder than they might think going in.”

Recent stumblings in the beauty box industry also imply that the model is difficult to scale. Birchbox, a pioneer in the space that once valued at $500 million, sold a majority of its business to a lead investor after a deal to sell the company to QVC fell through. Other versions, like Memebox and Essence, have shut down. And the risk of cancellation is high: According to a UPS survey of subscription members, 61 percent canceled a curated subscription box membership in 2017.

That’s not to mention how flooded the market has become with subscription-stuff-in-a-box iterations. In beauty alone, different versions are available from retailers (like Sephora, Dermstore, Macy’s, Walmart, Costco and, most recently, Target), influencers (like Michelle Phan’s Ipsy) and startups (like GlossyBox, LookFantastic, Love Goodly, Boxycharm and Benevolent Beauty).

But for as long as Condé Nast and Allure are able to run a business-within-a-business, tap editors for interesting-enough curation, and manage customer relationships on both the publishing and commerce ends of the company, the beauty publisher’s box is sitting on top of several revenue streams. The majority of the inventory that goes into the boxes is gifted to Allure by the brand for exposure (for some smaller brands, Allure will help cover the cost of products), but each box sells a pay-to-play sponsored product spot. Every brand featured in the box has the option to give customers a promo code to purchase a full-size product, but the Allure Beauty Box has no official retail partner. (Most brands send customers to their own e-commerce sites.) Allure only gets affiliate revenue if the customers buy through a follow-up email that links to every product featured in the box.

On top of subscription, sponsorship and affiliate revenue, the Beauty Box inspires more content against which Allure can run advertising: Each box gets its own unboxing video treatment on YouTube, and social media posts for the boxes are often sponsored on Instagram. Friedson added that it found through customer research that one out of six beauty box subscribers become subscribers of the publication, and 74 percent of subscribers purchased a product after receiving it in a box.

“Commerce is complementary to editorial, as well as an expansion opportunity for us,” said Friedson. “That’s a viable and rich program.”

Going forward, Allure is focused on growing its subscriber base, as well as improving the feedback loop from editorial to box and back again. The company doesn’t have any current plans to hold and sell inventory on its site.

“Personalization will continue to be a big movement for years to come. There’s a lot of noise out there, especially in the beauty space, as the feedback loop starts to get better, brands that are better at serving their audience and giving them something of value will rise to the top,” said Lee.